State of the Market – Demand, Costs, and Delays
The housing market is made up of various constituent parts and players. Most obviously there are the properties up for sale or rent and then the different personnel within the market, from prospective buyers and tenants, to landlords, property investors, and consortium's, and the professional infrastructure that enables the market to function.
This professional sphere includes, most obviously, estate agents, but also features surveyors, conveyancers, solicitors, lenders and mortgage providers, and regulatory bodies and the Bank of England. At differing times the market is slanted in the interests of one or several of these groups – it may be a buyers’ or sellers’ market depending on the market conditions and the economic climate, or conditions may impact negatively on certain groups.
At present in the UK one of the most obvious points about the housing market is that demand for houses is increasingly rapidly. According to the Council of Mortgage Lenders the number of sales reached 858,000 in 2009 and has risen to an expected 1.23 million for 2014 – a rise of 45 per cent.
The corollary of such a rise in demand has been an increase in the amount of work for housing market professionals such as solicitors, surveyors, and conveyancers to carry out. However, these industries were hit hard by the Recession and have been hamstrung by job losses – they simply have not been able to keep pace in many cases with the amount of business coming their way. The Conveyancing Association outs the number of conveyancers who lost their jobs during the Recession at around 6000.
The effect has been to slow the time it takes for transactions to go through and to drive up the costs involved in buying a house. The Conveyancing Association estimate that transactions are now taking an extra two weeks to carry out compared to five years’ previous, with costs rising by a quarter – the average £800 bill is now costing an extra £200 to homebuyers.
The other factor behind these delays is the implementation of the Mortgage Market Review (MMR), brought into force by the Financial Conduct Authority in April 2014. The MMR requires mortgage lenders to carry out extensive checks into the finances of prospective homebuyers and their capacity to make repayments even in the event of interest rate rises.
The new regulations have not only forced many prospective buyers to rethink whether they would be able to raise the capital to buy a house, it has also saddled mortgage lenders with a good deal more paperwork to get through. The Royal Institute of Chartered Surveyors puts the delays caused by conveyancing shortages and MMR paperwork at around two and four weeks. Either way, the final impact is to slow the market and hit the pocket of the buyer.